Girlfriend has loan but is now on maternity leave

wheelerc

Hi,

My girlfriend took out a loan from Natwest for £5,000 before we met (to pay for a car and driving lessons so she could get to work).

The loan was taken out at a rate of just over 18% over a period of 5 years... which means that once she has finished paying back the loan she will have paid back over £10,000.

Her monthly repayments are approx £174 over 60 months, and she has around 4200 left to pay.

While she was working the payments each month were not a problem, however she went on maternity leave last august for our Son who was born in October and is not due to return to work until May.

As she is only receiving SMP which is around £500 per month, the £174 repayments are taking quite a chunk of her income, and while I'm working and we can afford most things we need, she's upset that she can't contribute very much towards rent/bills etc.

Is there anything we can do about this loan? In my mind the fact Natwest lent her £5000 over 5 years at 18% is near criminal, as she will be paying back more in interest than she borrowed in the first place, and has already repaid £5,800 with two years left on the loan.

To make matters worse, at the same time as selling her the loan, Natwest set her up with an ISA account with monthly payments of £30 going into it, as well as signing her up for an 'Advantage Gold' account with a monthly fee (which she has since cancelled). Surely that's poor financial advice as the £30 per month would have been better used on paying off the loan at a faster rate?

I can take out a loan in my name for the remaining £4200 at a lower interest rate and use that to pay her loan off, but I was wondering if there are any other ways to deal with this, perhaps negotiate with Natwest, or is there a case for the original loan being mis-sold?

Tixy

18% is not near criminal, it may be a little higher than average but its obviously the rate they gave based on the risk they assessed.
You won't have any case for misselling of the loan or setting up the savings account. Plenty of people choose to have savings as well as debts and if your girlfriend did she can in no way blame Natwest for setting these up for her.

Her choices would seem to be ask if they will give a repayment holiday (although expect the total interest to go up slightly).
Default on the repayments and explain she cannot afford them whilst on maternity leave (though this will affect her credit rating for the next 6years).
Or as you mentioned you have a choice of taking out a loan for the remaining amoun thus taking on the debt yourself or making the payments on her loan yourself.

wheelerc

Hi Tixy,

Thank you for the advice, it would be nice if the bank's gave advice in the customers interest not purely their own, but then I guess at the end of the day they are just link any other form of business trying to make as much profit as they can, so I can't really blame them.

If I pay the loan off early will I have the pay the full amount outstanding, including any interest for the remaining two years, or will the settlement value be less given that they won't be leaning the outstanding amount for the next two years.

Off the top of my head, around £3,000 is left to pay on the loan and the rest of the £4,200 is interest? Or do they not work like this?

opinions4u

To make matters worse, at the same time as selling her the loan, Natwest set her up with an ISA account with monthly payments of £30 going into it, as well as signing her up for an 'Advantage Gold' account with a monthly fee (which she has since cancelled). Surely that's poor financial advice as the £30 per month would have been better used on paying off the loan at a faster rate?

Of course, if the loan payment had been £30 higher, the difficulty in meeting the payments now would be even greater.

is there a case for the original loan being mis-sold?

Not really. Did she want a loan? Yes. Did they provide the wrong sort of loan? It would appear not. Should they have sold a loan with a higher payment? Probably not, because she can't afford the one with a lower payment.

She asked for the loan. She signed the agreement. Now you are looking for a way out because of a lifestyle change.

I wonder if a bank could claim mis-impregnation in such circumstances? Or did a bank employee assist her in getting herself in this condition?

BackOnTrack

Can she not go back to work early? AFAIK maternity leave isn't compulsory.

andy.m_2

SMP isn't worth a 'J Arthur'.
See if she can get back to work, even part time to raise the extra each month.

Tixy

You'd have to ring to get an accurate settlement figure. You wouldn't be paying as much as the remainder of the repayments, but I think there is usually a small early settlement penalty (equivalent to 1 months interest I think -someone else should be able to confirm).

But obviously check you can definitely get a cheaper loan first.

Coveredinbees!!!!

She knew the terms when she took out the loan, it not the banks fault she got pregnant.

andy.m_2

Coveredinbees!!!! wrote: »

She knew the terms when she took out the loan, it not the banks fault she got pregnant.

aah, but can they provide a signed agreement to that effect?
Could be a case for fraudulantly reclaiming here!

OP I'm sorry, your situation isn't funny and you need to talk to the bank and see what options they will afford you.

wheelerc

Hi All,

Thanks all for the replies.

Opinions4u, if the repayments had been £30 higher per month, it would be much closer to being repaid by now, as it stands she has a ISA account with a few hundred pounds in it and has given the bank a lot of interest payments.

As I mentioned in the original post, it's not a case of not being able to afford the payments - I'd just rather we were spending the cash on our Son or our selves, than giving it to a bank, so came here for some financial advice.

I can borrow from HSBC at 7.6% so it sounds like that is the best route to take.

Thank you all again for the advice.

- Chris

p.s. Definitely no chance of mis-impregnation

HAYLEY8005

Just a thought if she has been paying £30 into the isa for the last 3 years can she access this amount to bring the loan down more then you would only need to borrow for the remainder . she should have over 1000 in there if it hasnt been used.